Lawmakers expand target of contractor pay-cap proposal

Congressional backers of a proposal to impose a stricter salary cap on government-funded contractor wages directed their efforts this month to the so-called supercommittee charged with coming up with a 10-year deficit reduction plan by Nov. 23. Those backers are now pushing for the most extreme version of the cap proposal yet.

Driven by the desire to restrain rising payments to contractors and make the companies feel the same pocketbook pinch as government employees, the latest call for change goes the furthest by proposing to significantly lower the existing cap by more than two-thirds and also greatly expand its reach to all of a contractor’s employees, not just a handful of senior executives, Matthew Weigelt reports on FCW.com.

Industry groups questioned the wisdom of the increasingly aggressive proposals and argued that they would hinder contractors’ abilities to recruit the most talented private-sector employees for critical government-funded work.

Sen. Barbara Boxer (D-Calif.), Sen. Chuck Grassley (R-Iowa) and Rep. Paul Tonko (D-N.Y.) sent an Oct. 12 letter to the members of the Joint Select Committee on Deficit Reduction urging the cap changes, as did an Oct. 13 report to the supercommittee from Democrats on the House Oversight and Government Reform Committee.

Current rules impose a cap of about $694,000 on the total amount contractors can charge the government for compensation of their top five employees. The recent proposals would lower the cap to $200,000 and apply it to all of a contractor’s employees. In September, President Barack Obama called for the reduction of the cap to $200,000 to match federal pay scales, but for contractor executives only.

Under all the proposed changes, as with the existing rule, the government would not limit the amount contractors can pay their executives or employees but only the amount the vendors can seek in compensation from the government per employee.

Contractor executives seemed not to have suffered excessively under the existing rules. The average reported annual compensation was $8 million per executive for the top five leaders at Lockheed Martin, Boeing, Northrop Grumman, General Dynamics and Raytheon, Brian Friel wrote for Bloomberg Government and the Washington Post in a story about recent efforts to cap compensation in defense contracts.

A former government contracting official told Friel that large companies with billions of dollars in government work can prorate the costs of executive pay across numerous contracts.

Government employee trade unions strongly support the more aggressive cap proposals.

“If $200,000 or less is enough for the Nobel-winning scientists at the National Institutes of Health and NASA; the secretaries of the Defense, State, and Health and Human Services departments; and the other professionals who work to protect the public interest, it's good enough for the government's contractors,” wrote Jacqueline Simon, public policy director at the American Federation of Government Employees, in a letter published in Federal Times.

About the Author

John Zyskowski is a senior editor of Federal Computer Week. Follow him on Twitter: @ZyskowskiWriter.